Sunday, September 2, 2012

Berkeley Study: Half-Star Change In Yelp Rating Can Make Or Break A Restaurant

Two Berkeley economists have found that the tiniest changes in online restaurant reviews can make or break a restaurant. A simple half-star improvement on Yelp’s 5-star rating makes it 30-49% more likely that a restaurant will sell out its evening seats. Online reviews, the researchers conclude, “play an increasingly important role in how consumers judge the quality of goods and services.”

The researchers validate the claims by combining yelp reviews of 328 San Francisco restaurants with a database that tracks real-time reservation availability from 6-8pm. The power of Yelp to fill a restaurant’s seats and the owner’s pocketbook holds up even when controlling for the establishment’s décor, service rating, and cost.

Careful readers may note that a higher-quality rating may simply denote a better restaurant, and the study is therefore only capturing patrons who prefer a better experience, who choose where to dine independent of Yelp’s rating. The researchers answer this critique by looking at restaurants whose Yelp rating difference by only a little bit, but whose official rating is at least one-half star different.

For instance, a two restaurants, one with a 3.74 rating and one with 3.76 rating, are similar in actual equality, but because they’ll get rated by yelp 3.5 and 4.0 respectively, could receive dramatically different reservation rates.

See, Yelp officially rates restaurants in half-star intervals, but publishes all of the ratings. The researchers can therefore recreate their own rating for each restaurant with much greater accuracy. It turns out, restaurants with strikingly similar aggregate ratings are nonetheless hurt by the official difference. “Differences in customer flows between such restaurants can therefore be attributed to the ratings themselves rather than differences in the quality of food or service.”

The researchers also note that Yelp does not impact well-known establishments (less than 500 total ratings). In other words, noone is checking Yelp to see if they should binge at McDonald’s or splurge at a celebrity restaurant.